Stocks were generally higher last week, with the notable
Apple (Nasdaq: AAPL)
. Traders often expect a pullback or aconsolidation after a big
gain like we've seen in the past few weeks. The big question is
whether thatwill be a reversal or a pause in a strong uptrend.
S&P 500 Moves Up Without Apple
Apple opened last week as the largest company in the world when
measured bystock market capitalization . After a 12% drop, Apple
had ceded the topspot to
Exxon Mobil (
. Apple accounts for more than 3.5% of the S&P 500index , which
makes the gain in that index noteworthy. It was broad-based
strength that pushed
SPDR S&P 500 (
to a 1.29% gain for the week.
PowerShares QQQ (Nasdaq: QQQ)
, anETF that tracks the 100 largest Nasdaq stocks, couldn't
overcome the drag from Apple, which makes up 13.5% of the index.
QQQ lost 0.1% for the week.
As we can see below, the two indexes have very different
SPY has continued building on the strength seen the first
trading day of the year. QQQ closed on Friday below its January
opening price, but most of that weakness can be attributed to
According to StockCharts.com, 80% of the Nasdaq 100 stocks are
in short-term uptrends. More than 81% of the S&P 500 stocks and
76% of allNYSE stocks (shown on the chart below) are on buy
signals. This is a level wheremarket gains tend to slow down.
The percent of stocks on a buy signal can't be used to precisely
time market tops or bottoms. But with so many stocks beingbullish
it doesmean that large gains are unlikely to occur quickly simply
because so many stocks are already participating in thebull market
. In the past, when this many stocks are "buys," we tend to see
major market averages drift higher.
Odds favor a consolidation, followed by more gains. Of course, a
sharp break in the stock market can never be ruled out, but it is
looking increasingly unlikely. The safest course of action in the
week ahead is to wait for a breakout, which is very close to
occurring on theupside , before entering a new trade.
Action to Take -->
Buy SPY at $151 or above. Short SPY at $144.50 or below. Place
initial stop-loss 5% away from the entry price if either order is
Gold Sells Off Despite Good News
SPDR Gold Trust (
fell 1.5% last week.Gold bugs have every reason to be bullish in
the long term with news out of Japan indicating that the Bank of
Japan (BOJ) intends to pushinflation up to about 2%. Time will tell
if the BOJ can reverse almost two decades of deflationary pressures
by printingmoney , but the fact that another majorcentral bank is
in favor of increasing inflation should support higher gold
However, in the short term, sellers seem to outnumber buyers in
gold right now and the price is falling. The monthly chart shows
now is not the best time to buy gold.
GLD is below its 10-monthmoving average (
), a signal that it could be starting abear market . Thestochastics
indicator has developed a sharpbearish divergence since GLD topped
in the summer of 2011 and completed a bearish crossover at the end
of December. With the MA now confirming that signal, traders should
consider taking short positions in gold.
PowerShares DB Gold Short ETN (
, an inversefund that gains when gold prices fall, was up 1.53%
last week. This ETN is still a buy.
Action to Take -->
Buy DGZ up to $12.25. Maintain stop-loss at $11.25. Maintainprice
target at $14.
This article originally appeared on ProfitableTrading.com:
Market Outlook: 'Sell' Signal in Gold Indicating
a Bear Market Could be Starting
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